🍟 2/29/2024 – The (20% EBITDA Margin) Business of Bundt Cakes
FRANCHISES OF THE WEEK
Nothing Bundt Cakes
Fast Facts
Background
- HQ: Atlanta, Georgia
- Founded in 1997, franchising since 2006
- Gourmet bakeries offering and selling specialty bundt cakes and other food products
Location Trends
Franchise Fees
- Royalty: 6%
- Brand Fund: 5%
- Franchise Fee: $35,000
Financial Overview
- The below table discloses information on 294 bakeries that have been operating for at least 24 months as of the end of 2022
The Wolf’s Take 🍟
If you’re reaction to the financials of Nothing Bundt Cakes (NBC) was anything like mine, you’re probably asking yourself:
“How on earth is a bundt cake business generating nearly $300k in EBITDA?”
And if you’re as out of touch with bakery delicacies as I am, then you’re also asking:
“Wait…WTF is a bundt cake?!”
Stay with me folks, as I’ll answer all the pertinent questions. First, the easy one…
Bundt Cake 101
A bundt cake is a cake that’s baked in a “bundt” pan (whatever that means), which shapes it into a distinctive donut looking shape. Bundt cakes [apparently] are deeper than your average cake, leading to a more moist finished product (i.e. tastier 😋).
Not to mention, bundt cakes are easy on the eye, and can make for a great aesthetic addition to parties (as you can see, NBC gets quite creative with the frosting and decorations).
Quick fun fact: Bundt cake comes from the German word ‘bundkuchen’, which roughly translates into “a cake for gatherings.”
Overall, bundt cakes are tasty and make for a great treat for the family and/or to bring to parties and events.
The Sweet Biz of Bundt Cakes
Now that you have your degree in bundt cakes, let’s talk about how NBC has become the king Bundt bakery in America.
The concept was founded by friends and entrepreneurs Debra Shwetz and Dena Tripp in Las Vegas back in 1997 (what happens in Vegas, stays in Vegas..except bundt cakes 🤝).
After beginning franchising in 2006, they grew the business to ~175 locations before getting acquired by LA based PE firm Levine Leichtman Capital Partners. LLCP successfully expanded NBC to ~390 locations by 2021, which is when our familiar overlords friends 😅, Roark Capital, acquired NBC for an undisclosed amount.
As of the most recent FDD, NBC has 475 locations, but today that number is estimated to be at ~525 units, meaning Roark has continued the very healthy growth trend of the franchise.
And as you saw in the financials, unlike eating bundt cakes, this business is HEALTHY.
Sign me up for this one 🤤
NBC is technically categorized with restaurant franchises, of which, the high performing brands typically have 10-12% EBITDA margin. Yet NBC is out here pulling ~20% EBITDA margins on bundt cakes!
BUNDT CAKES?! IN THIS ECONOMY?!!?
Seriously though – bundt cakes or not – the great people at Paylocity are hosting a panel discussion today at 12pm CT discussing the future of the restaurant industry. Register here!
Other Key Details
Some quick hitters before you try to get your piece of bundt cake biz:
- Avg ticket is $26.71
- Typical square footage / location is 1,990
- Only ~33% of bakeries operate 7 days / week
- The ramp up period to maturity looks to be about 4 years
- Bakeries generate about ~$900,000 in revenue in first year of ops
There’s no other way to say it, Nothing Bundt Cakes is a damn good business.
But with 500+ locations, it’s certainly an established brand with limited territory.
‘How limited’, you ask?
Normally I’d say restaurants can easily get to at least 1k+ units and not cannibalize others, but with a specialty product like bundt cakes, it’s harder to say how big the appetite is at scale.
If you end up looking into this brand, uncovering the continued expansion plan would be a good thing to learn from the folks at Roark.
You can also try to network like hell to get in front of current franchisees and try to acquire existing locations (check out my prior podcast with Michael Horowitz, former 20 unit Wingstop franchisee, on how to get in front of big brands and acquire existing units).
Hope you learned something new from this one, happy hunting and see you next week 🫡
Resources
FROM THE POD
Dru Carpenito & JT Singh – Franchising Insights
I brought on old friends JT SIngh and Dru Carpenito to give you all the inside scoop on franchise industry buzz, what new FDD’s we’re excited to check out, and JT tells us why he bought a fencing franchise!
Check out our conversation here!
Disclaimer: This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.
All Content in this email is information of a general nature and does not address the detailed circumstances of any particular individual or entity. Nothing in the email constitutes professional and/or financial advice, nor does any information in the email constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other Content in this email before making any decisions based on such information or other Content.