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. 

Business Ideas of the Week

  • Flat pack storage is an interesting biz, both the supply and end use, they can build a self storage location in 60 days

  • RE Cost Seg (accelerated depreciation for real estate investments) hits $150k per month, this business I feel is still wide open

  • Shower steamers are an interesting product trend

Business Success Stories of the Week

Previous
Previous

Business Idea: A Gumroad/Jobber Mashup

Next
Next

Rucking is the New Running