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The Pretzel Business

I have close friends in the pretzel and snack-food business (and worked in the snack food industry for a short time), so I think I can speak from an especially knowledgeable perspective on this. Stores like Auntie Anne’s, We’re Rolling Pretzel Company, Pretzel Time (by Mrs. Fields), and Wetzel’s Pretzels must have some of the highest margins in the QSR business. The dough is literally a few pennies per serving, if that. The seasoning and butter is another few pennies, and your selling the product for almost $2 each. I’m sure the franchisors significantly increase the cost of dough and supplies force margins more inline with the typical mall store.

Fresh pretzel businesses need very little square footage, and can often be served from a kiosk. They have the added advantage of smell in a mall, drawing people in with the scent of fresh baked buttery bread (OK, can you tell I love soft pretzels?). Most malls already have at least two pretzel franchises, but some do not. Depending on the rent, storefronts along a busy downtown street can capture enough of the afternoon foot-traffic to possibly turn a profit.

Let’s look at some fees charged by franchisors:

Pretzel Time:

  • Initial Franchise Fee: $25,000
  • Ongoing Royalties: 7% of Gross Sales
  • Advertising Fee: 1-3% of Gross Sales
  • Initial Training Fee: No charge for first two individuals
  • Total Estimated Initial Investment: $107,000 – $238,500

Wetzel’s Pretzels:

  • Initial Franchise Fee: $30,000
  • Ongoing Royalties: 6% of Gross Sales
  • Advertising Fee: 1% of Gross Sales
  • Initial Training Fee: No charge for first two individuals
  • Total Estimated Initial Investment: $102,000 – $211,000

Auntie Anne’s:

  • Initial Franchise Fee: $30,000
  • Ongoing Royalties: 7% of Gross Sales (paid weekly)
  • Regional Advisory Council Dues: $300/year
  • Audit Fee: All expenses unless if receipts were understated by more than 2%
  • Advertising Fee: 1% of Gross Sales (paid weekly)
  • Transfer Fee: $3,000
  • Franchise Renewal Fee: $15,000 or 50% of current franchise fee, whichever is greater
  • Lease Renewal: $2,000
  • Polling Set-up Fee: up to $400
  • Polling Recurring Fee: up to $100 per month as incurred
  • Lease Documentation Late Fee Penalty: $500
  • Relocation of Business Fee: 25% of current franchsie fee
  • Franchisor’s Lost Profits Following Termination: Royalty and Advertising Fees for the remaining term of the Franchise Agreement plus the greater of 18% per annum for the interest or the highest possible amount under your state’s law
  • Operating in Event of Default: $250 + travel + lodging + meals until default is cured
  • Initial Training Fee: No charge, minimum of 3 people
  • Service Fee: $250/day of help per person
  • Franchisee must cover legal and incidental costs incurred by franchisor if franchisor brings an action against the franchisee.
  • Total Estimated Initial Investment: $192,550 to $382,500

* I took the time to list most of Auntie Anne’s fees; Wetzel’s and Pretzel Time probably have similar fees

They are all similar, with Auntie Anne’s having the highest initial investment, probably due to their more ornate store style and you are buying into a more valuable and recognizable brand. I heard it’s near impossible for an individual franchisee to open up an Auntie Annie’s anymore in the U.S.A. (Auntie Anne’s Director of Franchise Sales seems to indirectly imply otherwise in the comments), but most other brands are actively seeking individual franchisees. Though Auntie Anne’s is the brand that most everyone knows, my guess is brand loyalty is low particularly for the reason that if you want a pretzel in a mall, you buy what’s available, whether that be Auntie Anne’s, Pretzel Time, etc. Several franchisrs predictably have expanded their menu to include hot dogs, frozen custard and burgers, or from the other direction to include pretzels in their existing menu. When evaluating which franchise system to buy into, I’d pay special attention to the franchisor with the lowest food and supply costs (a location will only support a narrow range of sales no matter what the franchise, so lower costs and fees over the year is very important), and competent level of responsive service. I’d also consider whether there is room for entrepeneurial selling, such as supplying local businesses, schools, or other events with tasty pretzels (the extra sale can make the difference between taking a salary or not).

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

18 comments

  1. I think I’ve had 3 of those pretzels. Some are butter-coated, others are like German-Bavarian style salted bread.

    I think hot dogs and burgers would cheapen the gourmet pretzel ambiance, and the cross-scents would ruin the lure of fresh baked bread.

    I think inventory control would be a problem. Who would know if the kids working give away 20 pretzels a day to their friends or to the opposite sex? They simply slice off portions to make the pretzels, and I often see them throw the pretzels away that have been sitting there for a few hours.

  2. I think most Aunti Anne’s franchsies are area deals. I heard they do provide good support, but Christ, all you do is slice up dough and bake it

  3. I agree with Ryan. There are so many “we prepare all food for all people” type franchises, instead of specialty franchsises. It’s OK to build off a core product of soft pretzels, but it won’t do you much good to have it one of those “Super Pretzels” rotating heat lamp cabinets going in the background.

  4. I haven’t heard bad things from franchisees, so that is a “good” thing. I would imagine the kiosks are the way to go because they can probably produce similar volume at less rent.

  5. any data how average store sales compare?

  6. Hi Ryan, I just wanted to let you know that Auntie Anne’s is still looking for qualified franchisees in many areas in the US. We still open 40+ stores per year in the US market and there are no plans to slow down. Auntie Anne’s is the world leader among pretzel franchisors, so if you’re passionate about pretzels, please check out our website and contact us for more information!

    Mike – Director of Franchise Development for Auntie Anne’s

  7. So what’s your point? That pretzels are big moneymakers? I am a former business owner and I’ll tell you straight up, the single most important factor
    that will determine if you make any money or not is your lease. Seen way to many persons get burned on the lease with a good concept only to “burn”
    themselves out working 70+ hours a week to make what equates to minimum wage (factoring overtime etc). Do yourself a favor and don’t believe
    what a franchisor tells you. I turned down a VP of operations postion with a major cold slab ice cream franchise because I was told to make it
    sound like the corporate store was making great money when it fact is losing money. I can verify that as a true story. For legal reasons I’ll leave
    it at that. Franchisees are always looking for new store owners because they’re in the business of selling franchises as it creates
    a permanent fund dividend from your sweat and blood, not unlike landlords. Are there good franchises out there? I’m sure, but be careful because like
    stock brokers, they make money whether you do or not.

    Peace

  8. Hi:

    The HOT new pretzel franchise to watch is “Didoughs Twisted Pretzel Company”. Someone said they are owned by Auntie Annes? But, I don’t think so, their pretzels are much better! God, if you ever eat one you will be completely addicted! They literally melt in your mouth!
    Their look is sleek and upscale, nothing like Auntie Annes. Look out Pretzel Franchisees! Here comes Didoughs!

  9. Anyone know what the average net income of an Auntie Anne’s Franchise?

  10. 8 / Shameless plugs are fine, but don’t pretend to be some gushy fan. Just say, “I’m the franchisor” or “I’m the PR firm for Didoughs”. If you are going to lie in blog comments, how are you gonna treat franchisees?

  11. As a current multi-unit franchisee of one of teh mentioned pretzel franchises mentioned in teh article….let me give some “on the ground” comments about the business. First, the labor market is beyond challenging. Should the federal minimum wage go to $7.25 and beyond anytime soon, you will see a significant decline in “open stores” and an increase in stores for sale. Second,the work ethic among teen and even the currently unemployed is horrible. Third,employee theft, fradulant workers comp claims and increasing operational cost are simply putting the small business owner out of business. The days of 20% profit margins are gone. And in many cases , unless you are an owner/ operator, you will see margins from loss to 8-12% . Given the business risk, such margins can be acquired thru alternative investments with far less headache and loss risk. As we have seen how gas prices rose and had a net affect on novelty and dining out purchases, we will see more declines in store sales due to other factors which will eventually lead to significant market problems for small business owners.

  12. WOW! I took a moment and searched “Didoughs” to see what things (hopefully good) were being said about us. Mandy, thank you for your comments. I certainly appreciate your kind words. I can tell you have been reading some of Didoughs marketing materials! You certainly show a favor towards Didoughs! You are correct, we are not owned by Auntie Anns. We are asked that question frequently. There are a lot of similarities. Both companies were founded by christian Mennonite women from Pennsylvania. Even though we are more of an “upscale” pretzel store, Auntie Anns certainly has a very clean and nice look, too. Didoughs pretzels do literally melt in your mouth! It took me over a year to perfect the recipe! And, yes, we are positioning to be the “Hottest” new franchise out there. We have been very blessed so far, and we are thankful for people like you saying kind words about us. We do encourage, however, that we focus on Didoughs opposed to slighting our competitors. Our mission statement at Didoughs is “Do unto others as you would do to yourself”, this keeps like in perspective. God Bless- Sandra Begly- Founder and President Didoughs Franchsing Corp.

  13. Auntie Ann’s is very popular here in New England. Top quality product- high name recognition.

  14. Auntie Anne’s has more than 750 locations in the US, and more than 930 worldwide, but we are definately continuing to grow with individual franchisees in the US market. Please feel free to check out our website http://www.auntieannes.com for more information on potential growth opportunities. We are always looking for outstanding operators to join our System and “Share the Perfection” of Auntie Anne’s pretzels with the world!

    Regarding some of the earlier comments, lease rates are extremely important in determining if a location is viable. We have a Real Estate Dept. that assists our franchisees in lease negotiations and site selection. We also provide our franchisees with very strong operational support and have excellent training programs, which is critical when evaluating where to invest your hard earned money. Stop by and check us out!

  15. I was wondering if there are any current franchisees here woh own a pretzel business willing to share thier experiences. I am considering buying one. Thanks.

  16. DIDOUGHS PRETZELS ARE #1…….IF YOU DONT THINK SO…THEN YOU ARENT NORMAL! BYE BYE

  17. Greetings,

    Are any of these pretzel companies interested in entering the mexican market?
    I’m quite fond of pretzels myself and believe there are huge profits to be made with this business –especially in border cities (Tijuana for ex) where the american culture is well infiltrated into ours and also, the number of americans living here is increasing yearly.
    If you know anything, please let me know for I am interested in setting a Pretzel business here.

    Thanks

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