Press Waffle Co.
The Press Waffle Co. is a Dallas, TX, based food service company that operates out of food halls and serves up scrumptious Belgian-style waffles for Americans. The entrepreneurs claim to have been inspired by a trip to Europe where they encountered Belgian waffles for the first time and that American waffles were found to be wanting in comparison.
When ordering a waffle from Press Waffle Co., customers have a choice of sixteen different sweet toppings or can even go savory with a piece of fried chicken on top. They claim that, of their pre-determine choice combinations, The House (basically, a waffle with everything on it) is their most popular.
When questioned about the calorie counts of their waffles, the entrepreneurs stated that they did not know as they had yet to do any calorie testing yet. However, they stated, they weren't really concerned as they had positioned themselves as an "indulgent" product.
As an example of pricing, it was stated that The House Waffle sold for $8 to the customer. The entrepreneurs claim to have a 14% gross profit margin and expect to bring in $900,000 in revenue by the end of the year. From this revenue, they estimate that their retail location brings in $5,000 per square-foot. They do claim, however, that their rent in the food hall is 25% of their gross revenue.
Press Waffle Co. has signed leases with seven other food halls, all owned and operated as company stores. The entrepreneurs state that the maximum rent to be paid on these new locations is 20% but that it averages to 15% across all of them, with the same stipulation as their first location that no revenues means no rent to be paid. They estimate that it costs between $115,000 and $150,000 to build out a new location.
In the next year, the entrepreneurs state that the Press Waffle Co. expects to earn $3,500,000 in sales, netting $500,000 in profit.
This deal aired on Episode 10.17.
Making A Deal
Barbara, citing the success of Cousins Maine Lobster, their thirty-five locations and $45,000,000 in revenue, also makes an offer. She gives them the option between $200,000 for 15% equity or $400,000 for 30%.
Kevin makes a typically Mr. Wonderful style offer of the $200,000 for a loan at 7 to 11% interest (and a presumed thirty-six month period) with a 3% equity "kicker" because he's "Mr. Wonderful." Barbara, naturally, thinks it's a lousy deal but Lori surprises everyone and says that she actually thinks it's a good deal and, as such, is out.
Robert jumps into the almost frenzy and offers $600,000 and asks the entrepreneurs to respond with an equity amount that they think is fair. The entrepreneurs decline Robert's offer because they believe that they'd have to give up more than 20% in order to make the deal work. Robert responds with an offer of $400,000 for 20%, mentioning that Sand Cloud is expected to earn $17,000,000 that year.
The entrepreneurs respond to Barbara, asking if she would accept $300,000 for 15% equity so they could protect their value. She counters at $250,000 for 15%. Citing their expectation that they will earn $500,000 in net profits the next year, the entrepreneurs respond that, to get to their value, they would like a 5x multiple on that value, countering Barbara at $300,000 for 15%. Barbara accepts and the Press Waffle Co. scores a deal at a very reasonable $500,000 bite from the initial value they came in with.
In episode seventeen of Season Eleven, Shark Tank aired an update on the Press Waffle Co. It stated that, before appearing in the Tank, the company did $450,000 in sales, which must be net sales because, when the deal aired, they stated that they had already expecting to bring in $900,000 in sales by the end of their year. The update also stated that they had done $1,300,000 in sales since appearing in the Tank. Again, this doesn't ring particularly great unless referring to net profit given that the Press Waffle Co. had expected to earn $3,500,000 in gross sales in the following year (a period which this update would have covered) but expected to net $500,000.
The same update also stated that the company was opening its first location outside of Texas and it's fourth in total in Oklahoma City, OK, and possibly the first opened by franchise partners.
Some clarification on the numbers would be great in order to judge just how well the Press Waffle Co. has made out since their deal with Barbara and to see if it holds up against prior deals she's done like Cousins Maine Lobster.
- $5,000 per square-foot is a ridiculous number but it is achievable because their business model is to operate out of food halls. This enables them to keep a very small footprint in comparison to an average fast-food restaurant and, when total revenue is divided over it, realize a massive return on square-foot revenues.
- 25% of gross revenues, in this case, may not actually be a bad thing, as the entrepreneurs point out. While certainly a high percentage of revenues, if they earn nothing then it also means they pay nothing. This can be a big advantage when setting up a new location.