Intro to Franchising
Franchising is a popular method for expanding business. Through a licensing relationship a franchisor, or business owner, essentially sells a franchisee the rights to open a new business location. For instance, Red Mango has many franchise locations, all of which were sold to various franchisees across the country. Once the Red Mango franchisee purchases a franchise, they are granted the right to build their own location using preexisting systems, regulations, etc.
Franchising is an attractive business model for anyone new (or not) to the industry. Unlike an independent business, which requires growing from the ground up, a franchise comes with a pre-established, and usually successful, operational system. Through extensive training programs, franchisees learn all the ropes behind the business, eliminating the daunting trial and error process. Not to mention, a franchise comes with brand recognition is built right in.
FRANCHISING IS AN ATTRACTIVE BUSINESS MODEL FOR ANYONE NEW TO THE INDUSTRY.
Anyone looking to purchase a franchise will be given a Franchise Disclosure Document (FDD). It’s imperative that any franchisee fully understand the components and contents in any business’ FDD. Consisting of 23 different parts, the FDD, a legally mandated document, outlines different key pieces of information involved in franchise purchase. For instance, a Franchise Disclosure Document tells the interested franchisee more about the total fees and costs associated with purchasing the franchise of their choice.
The overall intention of the document is transparency. Both the company and franchisee need to be on the same wavelength in order for the purchase and future management of the business to run smoothly. Click here to see a more in-depth description and analysis of the Franchise Disclosure Document.
The Story Behind the Business
You don’t see red mangoes often in stores – but once you’ve tasted one, you’ll never settle for anything less. Mangoes only turn red when they reach the peak of ripeness. That’s when they are the most delicious, and nutritious.The name, Red Mango, is a symbol of the company’s commitment to using only the best all-natural ingredients for our frozen yogurt, smoothies and parfaits..
Founder founder, Daniel Kim, opened the first Red Mango in 2007 after graduating from UC Berkleyand working as an investment banker at Donaldson, Lufkin & Jenrette. Today, there are over 200 locations nationwide and the company is looking to expand further.
Red Mango is devoted to using 100% all natural frozen yogurt. The franchise also features 22 varieties of smoothies on their menu. Red Mango is also known for being the first frozen yogurt store to be certified by the National Yogurt Association with the Live and Active Cultures seal, indicating the company’s use of real yogurt.
Franchising Since 2007
Miguel Foegal, President and Chief Operating Officer
Daniel J. Kim, Chief Concept Officer
Richard Jensrud, Chief Financial Officer
Greg Kaloustian, Chief Development Officer
Melitha Lynn Brown, Chief Legal Officer
Any prospective franchisee of Red Mango is expected to pay a nonrefundable Initial Franchise Fee of $35,000. If you prefer to go the route of a Non-Traditional Store, the franchisee is expected to pay a nonrefundable Initial Franchise Fee of $17,500.
These fees are uniform for all new franchisees, however, Red Mango does offer a Veteran Discount Program, a standard multi-unit Store Development Program, and a Pioneer Store Program. If a franchisee chooses one of these routes, then the Initial Franchise Fee is subject to change.
Once all of the various fees and costs are accumulated, Red Mango estimates that the initial investment for a Red Mango franchise usually ranges from $346,100 to $495,600. These estimates depend on various factors, including the location chosen, the wage rates at the time, and the local customer base, among others.
Red Mango does not offer franchisees any direct or indirect financing, nor does the company guarantee the lease or franchisee obligation.
Training and Assistance
The Red Mango initial training program is held at a designated regional training store, which can be found in New York, NY, Dallas, Texas, and Chicago, Illinois. This training is provided by the franchisor along with a training manual and other materials required to get started with the franchise. If a franchisee wants to bring another party to the training program, they must pay the franchisor a $1,500 fee.
Additional courses and seminars may be provided to the franchisee as Red Mango sees it appropriate. Furthermore, managers and key people must also go through a training program of their own to familiarize themselves with company protocol and procedures.
Any prospective franchisee must find a location site that meets Red Mango’s criteria and receives approval from the franchisor. Upon signing the Franchise Agreement, the two parties must agree on a “control date,” which determines the date by which a mutually agreed upon location will be chosen.
Any new Red Mango location must be built and equipped along the standards set forth by the company. Furthermore, while the franchisee may select their own architect, the party must be approved by Red Mango before they can begin any work.
Term of Agreement and Renewal
The length of term for the traditional self-serve store is either ten years after the store opens for business to the public or 11 years after the effective date of the franchise agreement. The franchisee may renew their franchise right for two additional five year terms. However, should the franchisee desire renewal, they must notify Red Mango with their intent to renew. They must also sign a new franchise agreement in order to extend the term.
Restrictions on Sources of Products and Services
All franchisees must purchase frozen yogurt machines from Red Mango’s approved third party vendor. Frozen yogurt mixes, similarly, including toppings, flavorings, bottled waters and teas, must also be purchased directly from the franchisor’s designated distributor.
Additionally, the POS computer system must also be purchased from the approved third party. The franchisee must also install and maintain any multi-media equipment and devices that Red Mango requires in its locations.
If a franchisee should desire to buy products from other suppliers, they must submit a written request to Red Mango to approve the desired supplier.
Red Mango provides franchisees with a table-style list of obligations they must uphold in order to maintain a franchise location. Among these is regular payment of all required fees (see below), meeting site development and pre-opening requirements (see “Location” above), and complying with standards and policies of the company. Red Mango also requires that the franchisee maintain the appearance of the location, completing any necessary remodels needed with time. The company also demands that the franchisee comply with any advertising requirements set forth by the franchisor, which may require additional fees and payments.
Initial Investment and Costs
|Name of Fee||Low||High|
|Initial Franchise Fee||$35,000||$35,000|
|Project Management Fee||$9,600||$9,600|
|Lease Deposits and Rent||$8,000||$12,500|
|Architect, Engineer, Drawings||$10,000||$12,000|
|Interior Improvements, General Contractor, Lighting, Tile||$120,000||$175,000|
|Milwork, Smallwares, Furniture, Interior Graphics, Fixtures||$60,000||$90,000|
|Soft Serve Machines, Chiller Unit||$62,000||$88,000|
|Pre-Opening Training Expenses||$3,000||$6,500|
|Grand Opening Advertising Promotion Fee||$10,000||$10,000|
|Additional Grand Opening Expenses||$500||$1,000|