FDD Talk 2021: Paris Baguette Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Paris Baguette franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Paris Baguette franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Paris Baguette franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Paris Baguette outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Paris Baguette’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019 and 2020 average, median, highest, and lowest sales for the company-owned and franchised Paris Baguette Stores that operated for the entire calendar year 2019 and calendar year 2020, respectively, and are similar to the type of Paris Baguette Store that you would operate (“2019 Reported Outlets” and “2020 Reported Outlets”)

• 2019 and 2020 average, median, highest, and lowest sales for the company-owned and franchised 2019 Reported Outlets and 2020 Reported Outlets open between 13 and 24 months as of December 31 of the applicable year

• 2019 and 2020 average, median, highest, and lowest sales for the company-owned and franchised 2019 Reported Outlets and 2020 Reported Outlets open between 25 and 36 months as of December 31 of the applicable year

• 2019 and 2020 average, median, highest, and lowest sales for the company-owned and franchised 2019 Reported Outlets and 2020 Reported Outlets open more than 36 months as of December 31 of the applicable year

Section I – Background Information

17 Things You Need to Know About the Paris Baguette Franchise

Appoints New Chief Development Officer

1.  In early December 2020, Paris Baguette announced that franchise development expert Mark Mele has joined its senior executive team as chief development officer. With more than 30 years of experience in corporate franchise sales and development, Mele will oversee the growing company’s development, design, real estate, and construction functions.

2.  Darren Tipton, CEO of Paris Baguette America, said, “Mark is an accomplished franchise growth leader whose experience working across diverse franchise systems will be invaluable as we expand the Paris Baguette brand throughout the U.S. and map our future growth.”

3.  Before joining Paris Baguette, Mele was chief development officer for Lightbridge Franchise Co., where he helped the company expand to nearly 100 Lightbridge Academy early childhood education centers. Previously, he led franchising efforts for Fierce Brands’ Retro Fitness and Let’s YO brands, overseeing development of over 100 fitness centers and frozen yogurt shops during his tenure.

4.  Earlier in his career, Mele was vice president of franchising for Rita’s Italian Ice parent Rita’s Franchise Co., where he established new franchise training, awards, and operations systems while helping the company convert numerous company stores to franchise-owned businesses.

5.  Before joining Rita’s, Mele worked for nearly a decade in the K-12 supplemental education industry, leading franchising efforts for Huntington Learning Center, and earlier for Kumon Math & Reading Centers, where over 500 new centers were established while he led franchising for the company.

6.  A Certified Franchise Executive (CFE), Mele began his career at Century 21 Real Estate Corporation, where he spent over 15 years directing franchise sales and development efforts for Century 21 and later at Super 8 Motels, and Carlson Hospitality Worldwide with the Country Inns & Suites brand.

Continues to Sell Franchises Amid Ongoing COVID-19 Pandemic

7.  At the end of April 2020, Paris Baguette said that it continues to seek multi-unit owners and area developers ready to leverage the unique short-term advantages provided in the franchising industry, despite the current economic challenges around the world. While the cloud of COVID-19 continues to consume the public and media’s mindshare, access to capital and other government-led and business-friendly initiatives creates unprecedented advantages for business owners.

8.  Gregg Koffler, vice president of franchise sales and development for Paris Baguette, said, “Though the restaurant industry is facing unique challenges, we’re seeing positive steps being taken to support our industry and business owners. Specifically, we’re seeing a more open and collaborative real estate market right now, which presents the potential for greater selection and better lease terms for our franchisees. In addition, banks are offering business-friendly rates and products to encourage economic growth. As a result, we are bullish about the long-term prospects of owning a Paris Baguette franchise, and believe the short-term presents positive advantages for potential franchisees to consider.”

Announces Plans to Develop First Canadian Location in Toronto

9.  In early October 2021, Paris Baguette announced that Canada will get its first location when the chain opens its flagship store in the heart of downtown Toronto in June 2022. Already a far-flung pastry empire, Paris Baguette has nearly 4,000 bakery cafes scattered around the globe, including locations in Paris, New York, San Francisco, London, Singapore, Seoul, and more. The company plans to have as many as 100 franchise locations in Canada by 2030, including additional cafes in Toronto, as well as locations in Vancouver, Edmonton, Calgary and Quebec.

10.  Jack Moran, CEO of Paris Baguette Canada, said, “It’s taken far too long for this beloved brand to enter Canada. With a flagship location in Toronto as a starting position, we believe Canadians will quickly realize why the rest of the world is so passionate about Paris Baguette.”

11.  Moran added, “Doing pastry and cakes the right way is a difficult enterprise. That’s why it’s almost impossible to find a place that offers high-end layer cakes. The mom-and-pop baker who used to be on every corner in Canada is gone. Supermarket cakes simply don’t compare to a cake that’s made fresh, on-site, every day, using perfected recipes that value tradition.”

12.  Light, airy, and elegant, Paris Baguette cakes have become favorites to bring to a party, whether for a special occasion, Mother’s Day, Christmas, or a graduation celebration. Additionally, the upscale, Parisian vibe of the stores provides a charming place to go for a bite of dessert on a date or after a movie.

13.  “There’s simply no other competitor in Canada offering what Paris Baguette does. We stand alone in this category. We’re specialists in pastry, whether you want warm croissants and coffee on your way to work, or sandwiches served on housemade bread served in a casually sophisticated ambiance for lunch. Add to that our show-stopping layer cakes and it all adds up to an experience that customers won’t find anywhere else,” said Moran.

Company History

14.  Paris Baguette was founded in 1988 by Korean businessman Hur Young-in, head of the food and confectionary group SPC, in Gwanghwamun, Seoul, South Korea. The bakery chain traces its roots back to 1945 when Hur Chang-sung established a small confectionary shop called Sangmidang. Over the next few decades, Sangmidang grew around South Korea and the company changed its name to Paris Croissant in 1986. The company’s name was changed again two years later with the launch of Paris Baguette. The bakery features French pastries and breads with a Korean twist.

15.  As a brand with decades of history, Paris Baguette grew quickly around South Korea. Paris Baguette expanded to other parts of Asia, including Singapore, China, and Vietnam. By 2004, Paris Baguette had become the No. 1 bakery chain in South Korea.

16.  Paris Baguette first opened stores in the United States in 2006. Since then, the chain has primarily focused its growth in the New York and Los Angeles areas, which both have diverse populations that are receptive to international brands. However, in recent years, Paris Baguette has been pushing expansion into other states in the U.S.

Entrepreneur’s Franchise 500

17.  Paris Baguette did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Paris Baguette franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Paris Baguette’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  16
• Outlets at the End of the Year:  26
• Net Change:  +10

2019

• Outlets at the Start of the Year:  26
• Outlets at the End of the Year:  38
• Net Change:  +12

2020

• Outlets at the Start of the Year:  38
• Outlets at the End of the Year:  53
• Net Change:  +15

Company-Owned

2018

• Outlets at the Start of the Year:  47
• Outlets at the End of the Year:  49
• Net Change:  +2

2019

• Outlets at the Start of the Year:  49
• Outlets at the End of the Year:  45
• Net Change:  -4

2020

• Outlets at the Start of the Year:  45
• Outlets at the End of the Year:  35
• Net Change:  -10

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The tables in this Item 19 present historical sales data for Paris Baguette Stores in 2019 and 2020.

• All of the company-owned Stores included in these tables are owned by Paris Baguette’s affiliate, PBA.

• PBA occasionally sells company-owned Stores to be operated as franchised locations. Those locations are reported as franchised or company-owned depending whether they were sold in the first 2 quarters of a year (reported as franchised) or the last 2 quarters of a year (reported as company-owned).

2019 Reported Outlets

• The “A” tables below provide “Averages Sales” data for the period January 1, 2019 through December 31, 2019 from company-owned and franchised Stores that operated for the entire calendar year 2019 and are similar to the type of Paris Baguette Store that you would operate (collectively, the “2019 Reported Outlets”).

• As of January 1, 2019, there were 49 company-owned Paris Baguette Stores (including 3 kiosks) and 26 franchised Paris Baguette Stores. The 2019 Reported Outlets include 40 company-owned Stores and 25 franchised Stores.

• The company-owned 2019 Reported Outlets do not include 3 company-owned Paris Baguette Stores that closed during the year, 3 company-owned Paris Baguette Stores that were sold to franchisees in the first 2 quarters of 2019 and are reported as franchised Paris Baguette Stores, and 3 company-owned Paris Baguette Stores that are operated as kiosks.

• The franchised Reported Outlets do include the 3 company-owned Paris Baguette Stores that were sold to franchisees in the first quarter of 2019, but do not include 2 franchised Paris Baguette Stores that were terminated during the year.

2020 Reported Outlets

• The “B” tables below provide “Averages Sales” data for the period January 1, 2020 through December 31, 2020 from company-owned and franchised Stores that operated for the entire calendar year 2020 and are similar to the type of Paris Baguette Store that you would operate (collectively, the “2020 Reported Outlets”).

• As of January 1, 2020, there were 45 company-owned Paris Baguette Stores (including 3 kiosks) and 38 franchised Paris Baguette Stores. The 2020 Reported Outlets include 30 company-owned Stores and 40 franchised Stores.

• The company-owned 2020 Reported Outlets do not include 6 company-owned Paris Baguette Stores that closed during the year, 5 company-owned Paris Baguette Stores were sold to franchisees in the first 2 quarters of 2020 and are reported as franchised Paris Baguette Stores, and 3 company-owned Paris Baguette Stores that are operated as kiosks.

• The franchised Reported Outlets do include the 5 company-owned Paris Baguette Stores that were sold to franchisees in the first and second quarters of 2020, but do not include the franchised Paris Baguette Store that was operated as a kiosk, nor the franchised location that was terminated during the year.

Part 1A – Average Sales for January 1, 2019 Through December 31, 2019 (All Reported Outlets)

Company-Owned Stores

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