Scooter’s Coffee Franchise Payback Faster With Sales Increase (2023)
Written by: Spencer Huang
This article is based on its 2022 FDD.
Scooter’s Coffee is an American chain of coffee stores specializing in quick service of espresso drinks, smoothies, and baked goods founded in 1998 and has grown to about 250 stores in the United States. Boundless Enterprises, a Nebraska-based LLC, serves as the parent company for Scooter’s. The parent company also owns two affiliate companies – Harvest Roasting and Boundless Operations.
Contents
Listen to this article
Scooter’s Coffee offers two types of franchises:
- a Drive-Thru Kiosk ( the “Kiosk”) and
- a Drive-Thru Coffeehouse (the “Coffeehouse”).
Kiosk stores are smaller and sales originate from drive-thru customers; these stores have no carry-out or in-store seating options. On the other hand, Coffeehouses offer inside seating as well as drive-thru options for customers.
Donald Eckles co-founded the Scooters business and has served in senior leadership ever since. He currently serves as Chairman.
Stepping into the Beverage Industry – and more specifically the quick service coffee industry – can be a daunting task, considering the significant start-up costs and the increasingly competitive nature of the industry. This article will break down the Financial Disclosure Document for Scooter’s Coffee and provide all the information that prospective franchisees should know before making an investment decision.
How is Scooter’s Coffee Positioned in the Food and Beverage Industry?
The quick service coffee industry is well-established and highly competitive in America. Scooter’s expects its franchises to compete with nationally established chain stores, such as Starbucks, Peet’s Coffee, and Dunkin Donuts, as well as local stores and independent restaurants.
How Much Does a Scooter’s Franchise Cost?
The estimated total initial investment for a Scooter’s Franchise depends on the store type. A kiosk may cost anywhere in the range of $512,400 to $890,600 while a coffeehouse may set you back anywhere from $375,300 to $1,046,000. Potential franchisees who intend to open multiple Scooter’s stores will be charged a nonrefundable $5,000 Development Fee for each additional store opened.
A full breakdown of the costs is shown below. Note that regardless of the type of store, an initial franchise fee and opening support fee totalling $50,000 is due at signing. Much of the variation in costs come from Free Standing Building and Leasehold Improvements, which are costs associated with remodeling an existing retail space to meet the square footage and location requirements of Scooter’s Franchises.
Scooter’s Franchise Costs
| Type of Expenditure | Amount | To Whom Payment is to be Made | |
|---|---|---|---|
| for Kiosk Store | for Coffeehouse Store | ||
| Initial Franchise Fee | $40,000 | $40,000 | Us |
| Initial Opening Support Fee | $10,000 | $10,000 | Us |
| Free Standing Building and Leasehold Improvements | $255,300 to $506,900 (not including the purchase of land) | $146,500 to $679,900 (not including the purchase of land) | Other Suppliers |
| Architectural and Engineering Fees | $10,400 to $38,400 | $9,000 to $30,900 | Other Suppliers |
| Equipment, Fixtures and Furniture | $135,500 to $153,300 | $116,600 to $177,900 | Harvest Roasting and other Suppliers |
| Signs | $23,700 to $40,000 | $15,700 to $35,300 | Other Suppliers |
| Point-of-sale system and software | $7,000 to $11,000 | $7,000 to $11,000 | Other Suppliers |
| Deposits and Licenses | $2,500 to $7,000 | $2,500 to $7,000 | Other Suppliers |
| Initial training: travel and living expenses | $4,000 to $7,000 | $4,000 to $7,000 | Other Suppliers |
| Opening inventory, Suppliers, and Smallwares | $14,000 to $17,000 | $14,000 to $17,000 | Harvest Roasting and other Suppliers |
| Additional Funds – 3 months | $10,000 to $30,000 | $10,000 to $30,000 | Other Suppliers and Your Employees |
| Total | $512,400 to $890,600 | $375,300 to $1,046,000 | |
Franchise Requirements
Certain requirements must be met in order to own a Scooter’s Franchise.
The Scooter’s Franchise must be operated in compliance with the Franchise Agreement. Scooter’s will provide an Operations Manual that will contain standards that must be followed. These standards include what proprietary items may be sold and restrictions on store build-out, computer software, and supplier and product approval.
Additionally, Scooter’s requires new franchisees to participate in two training sessions, both based in Omaha, Nebraska. The 3-day Immersion Training workshop occurs between 90 and 120 days of signing the Franchise Agreement and discusses the business management principles of owning a franchise. The 4-week Operations Training workshop must be completed 6 to 8 weeks before store opening and details the day-to-day practice of running a store. A full breakdown of the training programs, broken down by hours of training, is shown below.
Immersion Training Program
| Subject | Hours of Classroom Training – Estimated | Hours of On-the-Job Training-Estimated | Location |
|---|---|---|---|
| Orientation | 1 | 0 | Omaha, NE Training Facility |
| Speed, Consistency & Tools | 2.5 | 0 | Omaha, NE Training Facility |
| Success Factors | 4 | 0 | Omaha, NE Training Facility |
| Training Roadmap | 1 | 0 | Omaha, NE Training Facility |
| Supply Chain | 1 | 0 | Omaha, NE Training Facility |
| Human Resources | 3 | 0 | Omaha, NE Training Facility |
| Finance & Accounting | 1 | 0 | Omaha, NE Training Facility |
| Construction | 1 | 0 | Omaha, NE Training Facility |
| Marketing | 1.5 | 0 | Omaha, NE Training Facility |
| Franchisee Panel | 2.5 | 0 | Omaha, NE Training Facility |
| Action Planning | 1.5 | 0 | Omaha, NE Training Facility |
| Total | 21 |
Operations Training Program
| Subject | Hours of Classroom Training – Estimated | Hours of On-the-Job Training-Estimated | Location |
|---|---|---|---|
| Orientation | 4 | 0 | Omaha, NE Training Facility |
| Customer Service | 18 | 26 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Daily Operations | 12 | 20 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Marketing | 2 | 0 | Omaha, NE Corporate Headquarters |
| Scooter’s Accounting and Reporting | 2 | 0 | Omaha, NE Corporate Headquarters |
| Inventory Management | 2 | 4 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Staffing Recommendations | 2 | 4 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Station Deployment | 2 | 10 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Beverage Recipes/Drink Preparation and Practice | 10 | 30 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Culture and Engagement | 2 | 10 | Omaha, NE Training Facility and Scooter’s Coffee location |
| Total | 56 | 104 |
Ongoing Fees
The main fees associated with owning a Scooter’s franchise are as follows:
- A 6% royalty fee for all gross sales accrued per reporting period, and
- A 2% marketing fee.
While the royalty fee is higher than the Food And Beverage Industry average of 5.3%, Scooter’s 2% marketing fee is slightly lower than the industry average of 2.3%.
Additional minor fees, such as Local and Regional Marketing Cooperatives, Technology Fees, and Insurance Premiums, vary depending on location and circumstances.
Company Trends
Scooter’s as a company has seen growth in the number of franchised kiosk and coffeehouse stores every year from 2014 to 2020, the most recent year for which there is data.
Company Trends
| Measurament Period | Total Franchised Kiosk Stores Operating at Year End | Participating Kiosk Stores | Total Franchised Coffeehouse Stores Operating at Year End | Participating Coffeehouse Stores |
|---|---|---|---|---|
| 2020 | 187 | 140 | 79 | 75 |
| 2019 | 139 | 101 | 74 | 62 |
| 2018 | 103 | 84 | 63 | 54 |
| 2017 | 85 | 70 | 54 | 52 |
| 2016 | 67 | 51 | 56 | 39 |
| 2015 | 56 | 41 | 41 | 32 |
| 2014 | 46 | 37 | 34 | 31 |
Additionally, both Average Gross Sales and Median Gross Sales among participating Kiosk and Coffeehouse stores have increased in each successive year from 2014 to 2020. In particular, Average Gross Sales increased by 34.7% for Kiosks and 16.0% for Coffeehouses in 2020, which represents the largest year over year percentage growth in the most recent six years.
Average Gross Sales – Participating Kiosk Stores
| Calendar Year | Store Type | Average Gross Sales | Number and Percentage that Attained or Exceeded the Average | Median Gross Sales | Low/High Range |
|---|---|---|---|---|---|
| 2020 | Kiosk | $637,104 | 59/42% | $587,723 | $161,902/$1,299,039 |
| 2019 | $473,012 | 44/44% | $453,470 | $129,969/$1,045,297 | |
| 2018 | $429,289 | 42/50% | $428,577 | $92,100/$989,614 | |
| 2017 | $404,761 | 39/56% | $426,610 | $73,217/$878,061 | |
| 2016 | $397,895 | 28/55% | $404,480 | $72,563/$881,732 | |
| 2015 | $384,208 | 23/56% | $396,639 | $79,793/$807,320 | |
| 2014 | $327,341 | 18/49% | $325,004 | $111,635/$626,438 |
Average Gross Sales – Participating Coffeehouse Stores
| Calendar Year | Store Type | Average Gross Sales | Number and Percentage that Attained or Exceeded the Average | Median Gross Sales | Low/High Range |
|---|---|---|---|---|---|
| 2020 | Coffeehouse | $691,953 | 38/51% | $710,292 | $142,198/$1,656,587 |
| 2019 | $596,543 | 32/51% | $620,484 | $106,487/$1,286,052 | |
| 2018 | $539,317 | 27/50% | $540,588 | $88,190/$1,100,713 | |
| 2017 | $506,280 | 22/42% | $472,137 | $77,845/$1,037,554 | |
| 2016 | $535,634 | 19/49% | $533,879 | $82,512/$990,567 | |
| 2015 | $533,670 | 17/53% | $532,201 | $67,176/$950,407 | |
| 2014 | $441,406 | 16/52% | $446,332 | $79,424/$878,504 |
A healthy increase in the number of stores and gross sales is a positive sign for prospective franchisees.
How much do Scooter’s Coffee Franchise Owners Make?
As shown above, median franchise sales in 2020 were $587,723 for Kiosks and $710,292 for Coffeehouses.
Based on a midpoint investment of $701,500 for a Kiosk
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $701,500 | 10% | $58,772 | 13 years |
| 15% | $88,158 | 9 years | |
| 20% | $117,555 | 7 years |
Based on a midpoint investment of $710,650 for a Coffeehouse
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $701,650 | 10% | $71,029 | 11 years |
| 15% | $106,543 | 8 years | |
| 20% | $142,058 | 6.5 years |
Note:
Many factors affect the sales, costs, and expenses of your Franchise. There is no guarantee that these numbers will be reflective of the time it takes for your Franchise to recoup your initial investment.
Is the Franchise Profit Worth the Cost?
While Scooter’s is a growing company and has seen increasing gross sales over the past six years, the 7-14 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait. Other companies in the food and beverage industry may provide a better investment opportunity. For more examples, check out other businesses offered on Vetted Biz.
What are Alternatives to a Scooter’s Franchise?
Since there are so many plates in the Coffee Industry, these are some players you might want to consider:
Bigby
Biggby is a community coffee shop chain with offerings of espresso beverages, sandwiches, baked goods, etc. Their franchise is generally operated from either a free-standing, storefront or strip center location or a prefabricated modular structure. Biggby has a very high focus on community integration which they credit for their economic recovery after COVID. Robert P. Fish is a Co-Founder and Co-CEO of Biggby since April 2016 along with Michael J. McFall. Both of them are managing members of Global Orange, Biggby’s associates.
A 15% profit margin would mean it would take nearly 4.5 years to recoup your investment. Based solely on the Franchise Disclosure Document, Biggby may be an exciting investment opportunity for potential franchisees. The company presents itself as an up-and-coming player in the industry focused heavily on community values and engagement. It is offering a chance to be a part of an industry that has been long present. While still in its early stages, Biggby Coffee’s growth seems to be accelerating.
Dunkin’ Donuts
Dunkin’ Donuts, also known as Dunkin’ and DD, is an American multinational coffee and doughnut chain. It was founded by Bill Rosenberg in Quincy, MA in 1950. It began rebranding as a “beverage-led company”, and was renamed Dunkin’, in 2019 with stores in the U.S. beginning to use the new name. The rebranding is to eventually be rolled out to all international locations. With approximately 12,900 locations in 42 countries, Dunkin’ is one of the largest coffee shop chains in the world. At the close of 2021, there were 8,000+ Dunkin’ franchised locations in the US. It is led in the US by David Hoffmann as CEO & President and former CEO Nigel Travis in the role of Executive Chairman.
Based on the median sales provided by Dunkin’s Drive-Thru franchise locations, at an average of a 15% profit margin it will take around 5.5 years to recoup your investment. This is in the same range as other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment. Dunkin’ Donuts offers people the opportunity to be a part of a business that has high net sales and is rapidly expanding. It is impossible to understate the brand recognition that Dunkin’ has in the US market.
PJ's Coffee
PJ’s Coffee is a retail coffeehouse chain in the south. It was founded by Phyllis Jordan (and, thus, PJ) in 1978. Since 2004, they have been competing with Starbucks in the local areas and aim to go countrywide. They had 121 franchised and 11 affiliate-owned locations as of 2021.
The estimated total investment necessary to begin the operation of a PJ’s Coffee Franchise ranges from $406,000 to $1,024,000. Based on the median sales provided by PJ’s Coffee franchise locations, at an average of a 15% profit margin it will take around 8.5 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.
Conclusion
While Scooter’s is a growing company and has seen increasing gross sales over the past six years, the 8 – 9 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait. Other companies in the food and beverage industry may provide a better investment opportunity. For more examples, check out other businesses offered on Vetted Biz.
