Bottom line
- Total investment $648K – $2.0M including a $36K franchise fee, 6.0% ongoing royalty.
- Average unit revenue of $1.1M/year (median $1.1M).
- Rated STRONG with a risk score of 50/100. SBA loan default rate of 0.0% across 516 loans (below the industry average).
- System contracting at -6.4% CAGR over 3 years. Investigate whether closures are franchisor-driven (consolidation) or franchisee-driven (economics).
Item 1 · who you're contracting with
The Franchisor
Yale framework · single-unit ROIC
Returns Analysis
Pulls Item 7 (investment) and Item 19 (revenue) from this brand's FDD into the Yale unlevered-ROIC formula. Override any input to stress-test it against your own assumptions.
The model · Yale framework
What would one Schlotzsky’s unit return on the cash you put in?
Unlevered ROIC · per unit
11%
Below typical band (30–60%)
Levered LBO scenario · Yale Crease Capital framing
What would 25 Schlotzsky’s units return on equity?
Equity IRR · 5-yr
49.9%
7.57× MOIC
Year-1 DSCR
1.88×
EBITDA ÷ debt service
Equity required
$1.3M
on $6.7M purchase
Total debt
$5.3M
SBA $3.3M + senior + seller note
Overview
About
Franchisees operate fast-casual sandwich and pizza restaurants serving made-to-order specialty items. Day-to-day responsibilities include managing kitchen and front-of-house staff, food preparation oversight, inventory control, marketing execution within brand guidelines, and royalty/rent payment obligations on a typical $1.11M annual revenue base.
Item 7 · what it costs
The Vitals
Item 19
Financial Performance
Item 20 · unit dynamics
The Growth Chart
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 7 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator — not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee phone area codes (Item 20). Approximate — ported numbers may show the original state, not the franchisee's current location.
Government records
SBA Loan Data
Aggregated from SBA 7(a) loan disclosures, public data unique to FranchiseVerdict.
FranchiseVerdict rating + FDD Items 3, 5, 6, 12, 17
Risk & Legal
Schlotzsky's presents moderate-to-high risk due to shrinking unit base, undisclosed profitability metrics, legacy litigation, and long franchise commitment relative to declining system momentum.
Score breakdown · what drove the 50 / 100 rating
- 01MINORDeclining unit count (-5.1% YoY) suggests system contraction and potential market saturation or franchisee dissatisfaction
- 02MINORNo Item 19 (Average Unit Volume) disclosure limits ability to validate $1.11M avg revenue claim against actual profitability
- 03MINORHigh initial investment range ($647K-$1.95M) with 6% royalty creates significant break-even burden; unclear if avg revenue supports ROI
- 04HIGHLitigation history: predecessor interference claim ($250K settlement) plus parent company affiliate settlements (Arby's/Dunkin') on labor practices raise operational/reputational concerns
- 05MINOR20-year term is longer than industry standard (10-15 years typical), reducing franchisee flexibility and increasing long-term capital risk
- 06MEDProtected territory provides competitive advantage but doesn't offset unit decline and profitability uncertainty
Severity inferred from the FDD text · not a regulatory classification
FDD Items 5, 6, 12, 17 · continued from Risk & Legal
Contract & Territory Detail
Item 11
Training & Operations
Item 20
Franchisee Contacts
Phone numbers extracted directly from this brand's FDD Item 20. After purchase, you'll also receive a list of validation questions tailored to this brand.
Franchisee contacts
94 numbers
One-time purchase · CSV download · Validation questions included
FDD download
Schlotzsky’s · FDD (2025) PDF