Dirty Dough Franchise Cost, Lawsuit and Financials (2024)
From dorm room kitchen in Tempe, Arizona to franchise locations spreading across the nation, Dirty Dough has made its characteristic cookies famous – it is what is inside the cookies that matter! Primarily in Arizona, it has already expanded to Utah and it is looking for more franchisees!
They have commitments from franchisees to open 150+ locations in the next few years. One of its goals is to lower the barrier to business so that more people can be entrepreneurs.
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How is Dirty Dough Positioned in the Food & Beverage Industry?
The food and beverage industry is a significant contributor to regional economies and to the U.S. economy. It is a stable industry in terms of employment and labor income due to the consistent demand for food. The food and beverage sector accounts for about 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI). It has total sales of $1.4 trillion, of which $164 billion in value-added is generated by the food and beverage industry alone.
Food and beverage franchises are often the first things people correlate with the franchise industry. Food & Beverage is certainly one of the most popular areas of franchising. Although food franchising is often associated with fast food, the industry also includes fast-casual, coffee, and pizza. Of the food and beverage concepts we have reviewed, total investment amounts can start as low as $3,000 for smaller kiosk concepts all the way up to $6,732,615 for a full-service restaurant.
What is the Dirty Dough Franchise Cost?
The total investment necessary to begin the operation of a brick and mortar Dirty Dough franchise business ranges from $160,600 to $385,000, which includes $49,500 to $52,000 that must be paid to the franchisor. Additionally, potential franchisees have the opportunity to enter an area development agreement, where a minimum of five locations are required. The up-front fee is $15,000 for each unit plus the area development fee of $30,000 for a total minimum investment to enter into an area development agreement of $105,000.
The total investment necessary to begin the operation of a mobile Dirty Dough franchise business ranges from $104,300 and $150,500, which includes the $97,000 to $121,000 that must be paid to the franchisor or its affiliates.
Once the operations begin, franchisees are expected to pay the company a royalty fee of 7% on gross sales and a marketing fee of 3% on gross sales.
How Much Does a Franchise Owners Make?
Although Dirty Dough does not provide a comprehensive financial performance of its franchisees, it presents the sales and costs of one affiliate-owned Dirty Dough Cookies location in Tempe, Arizona. As some outlets have earned the amount it presents, individual results may differ.
Last year, this location earned an annual gross sales of $461,546 and average monthly costs of disclosed items were $3,386.49, which amounted to an annual cost of $40,638. This leads to an estimated profit of $420,908.
However, this is not a comprehensive estimation because the figure does not reflect the labor, rent and food expenses that must be deducted from the gross sales figure to obtain the net income or profit.
| Expense Item | Monthly Average |
|---|---|
| Store Graphics | $25 |
| Grease Trap Servicing | $25 |
| Cleaning Supplies | $95.48 |
| Packaging | $837 |
| General Liability Insurance | $125.17 |
| High Speed Internet | $129.80 |
| Laundry Service | $59.15 |
| Uniforms | $49 |
| Time Tracker | $49.95 |
| Phone Service | $16.61 |
| Pauroll and HR | $175 |
| Drinking Water | $10 |
| POS System | $247 |
| POS Processing Fees | $907.63 |
| Workers Comp | $139.58 |
| Utilities | $470.12 |
| QuickBooks | $25 |
| Total Monthly Average | $3,386.49 |
We can thus estimate the net profit using $460,000 as the “gross sales.”
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $272,800 | 15% | $69,000 | 5.5 years |
| $272,800 | 20% | $92,000 | 4.5 years |
| $272,800 | 25% | $115,000 | 3.5 years |
Based on the average sales provided by franchise locations, at a 20% profit margin it will take around 4.5 years to recoup your investment, including 1.5 years to reach the breaking point of starting the operation and generating significant income. You may not get a 20% profit margin which would elongate getting a return on your investment.
Is the Dirty Dough Franchise Profit Worth the Franchise Cost?
Based on our evaluation, the resale price for a single Dirty Dough is 4 times the estimated profits. If you own a single unit of Dirty Dough and a profit margin of 20%, the unit would sell for $336,724, which is slightly higher than the midpoint investment of $272,800. Additionally, franchise owners who operate a multi-unit system can sell the system at 7 times the estimated profits. So, if you had 5 franchises, this would be $589,276 per store
How Many Dirty Dough Franchised Units Have Opened and Closed?
| State | Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by Franchisor | Ceased Operations for Other Reasons | Outlets at End of Year |
|---|---|---|---|---|---|---|---|
| Arizona | 2019 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2021 | 0 | 1 | 0 | 0 | 0 | 1 | |
| Utah | 2019 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2021 | 0 | 3 | 0 | 0 | 0 | 0 | |
| Total | 2019 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2021 | 0 | 4 | 0 | 0 | 0 | 4 |
We can see that Dirty Dough has just started franchising and there is not much data on the changes in the number of units it has opened or closed, nor can we estimate its failure rate.
However, we can see that currently its franchisees primarily operate in Arizona and Utah, with a total number of 4, providing a huge market for potential franchisees who are interested in the bakery industry.
What Happened in Utah’s “Cookie War?” - Dirty Dough Litigation with Crumbl Cookies
The dispute started when Logan, UT based Crumbl Cookies filed a lawsuit, claiming that two smaller Utah-based competitors, Dirty Dough and Crave Cookies, have infringed their recipe and trademarks. The co-founder and CEO of Crumble Cookies on Linked In claimed that Dirty Dough has stolen their “trading secrets from Crumbl’s internal database,” including 66 cookie recipes and other proprietary properties. However, Dirty Dough responded on its Instagram account denying any accusations and chided Crumbl for “doing exactly what it criticized Dirty Dough of doing — using social media to shed light on the Utah Cookie Wars.”
Crumbl is a large cookie-making company that launched in 2017 in Logan and now boasts 565 locations in 47 states, while Dirty Dough just opened its first store in Utah in 2020 and has a long way to go.
Conclusion
Dirty Dough positions itself in the bakery industry, selling cookies and other desserts. As it just started franchising, it is too early to conclude whether it is a profitable business for prospective franchisees. With only 4 franchisees, we need more information in the future to reach a conclusive conclusion. For now, the profit margin and resale price are not as desirable as they should be.
