THE DAY.
in the country. 7 Brew has now attracted some of the country’s best and most sophisticated fran- chisees, most notably Greg Flynn, who had largely avoided emerging chains since he got into franchising in the late 1990s. Last year, Flynn signed a 160-unit development agree- ment with 7 Brew. The brand, along with the publicly traded Dutch Bros, has pushed the restaurant indus- try to rethink and broaden their beverages, as younger consumers flock to the shops for their colorful, customizable and social me- dia-friendly beverages—most of which are served cold. Demand for these beverages is such that these concepts are booming even though there are more than 32,000 coffee shop loca- tions in the U.S. Indeed, as we noted earlier this week, coffee brands are generating or- ganic growth despite the aggressive develop- ment. But the real story in 7 Brew is in the shops. A typical 7 Brew costs between $940,500 and $2.3 million to build, according to the compa- ny’s franchise disclosure document. They op- erate in modular buildings that are 510 square feet and cost $310,000 to $600,000 before freight and installation. Those long lines of customers mean a typical location makes $2.7 million. Do the math, and that is $5,213 per square feet. By comparison, a standalone Chick-fil-A, which generates $9.2 million in sales per year, does $1,700 to $2,000 per square foot. That is an almost unfathomable sales level. All of this has made 7 Brew a lucrative business. The company generated $113 mil- lion in revenues last year and $45 million in net income, according to the FDD. But affili - ates that sell the modular buildings and other
supplies to franchisees generated another $93 million in revenue, for $205 million. The company has a unique, tiered royal- ty requirement based on sales. Stores that do less than $20,000 in sales per week pay 4.5% of their revenues as royalties. They pay 5.5% if they make from $20,000 to $25,000 and 7% if more than $25,000. That both benefits the company when stores do well and provides relief for those that do not do well—and many of the stores perform exceptionally well. 7 Brew is showing no signs of slowing down. Buoyed by its well-capitalized and ag- gressively developing franchisees, the com- pany is projecting another 437 locations this year, which will put the brand over 1,000 and make it easily a Top 50 chain.
The company can do all this because it is a franchise, and one that generates strong sales and profits. The franchisees are well-capitalized, op- erate in a hot sector and make a lot of mon- ey doing so. That prompts more and more growth and the franchisor doesn’t spend its own money in the process. There is danger, of course. Fast growth can ultimately be its own worst enemy, as companies outpace their demand and fickle consumers turn to other options. The world has been full of them, notably Krispy Kreme and the entire frozen yogurt sector. Yet 7 Brew has the economics, and cer- tainly the long lines and the traffic problems, to justify all these new locations.
JULY 2026 RESTAURANT BUSINESS
9
Powered by FlippingBook