Economics of The Milkshake Business
Dan Reese, President of the Milkshake Factory, dropped the inside scoop on their ten location premium milkshake business this week.
A store costs $430,000 to $590,000 to build out. They range from 1,300 to 2,000 sq. ft with eight to 20 seats but the smaller stores drive similar revenue.
The stores bring in $800,000 to $850,000 per year on average with a few crossing the seven figure mark.
But what about the margins?! Well the shakes have a gross margin of 75% and the stores have high 20% margins.
So How Much Does a Milkshake Business Make?
Let's assume you started your own brand and had the average of the ten Milkshake Factory locations.
Taking an average store with $825,000 in revenue at a 25% margin a store would make $206,250 per year. At an average build cost of $510,000 that’s a 40% return on your cash (ignoring your time).
That’s an interesting business.
A few more points from the pod:
After the concept worked they opened six locations in 18 months
There’s no greasy cooking equipment that you would have in a restaurant
The founders are 4th generation chocolatiers
They use top notch ingredients, real strawberry puree, real vanilla bean
They make the ice cream in the store
Labor efficiency is key, in slow times the employees are making ice cream and prepping ingredients
Chocolates make up 20% of their business
All of their stores are in Pittsburgh, which they do not think is a top tier milkshake city
They recently decided to franchise. There’s a $60,000 franchise fee, a 6% royalty and 2% brand fund.
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