When it comes to chocolate chip cookies, Nestle Toll House is the authority in the United States. They make the best chocolate chips and have the best recipe for soft, chewy, delicious cookies. It only makes sense that they would make their own fresh batches and sell them to hungry customers.
Nestle Toll House Cafes by Chip have been popping up all over the country, mainly in shopping malls and shopping centers. They offer some stiff competition to long-time industry leader, Mrs. Fields, and provide shoppers with a tasty treat and warm beverage for their shopping journey.
Nestle Toll House is already a household name in this country but they are looking to expand their cafes by adding even more franchisees to their team.
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From Cookies to Coffee
In 2000, Doyle Liesenfelt and Ziad Dalal created Crest Foods, Inc., which would go on to do business as Nestle Toll House Cafe by Chip. They founded the company in Frisco, Texas as a way to take the Nestle name and use it to create competition for the wildly popular Mrs. Fields. Aimed at cookie industry domination, they created the brand for the purpose of selling franchise licenses. To date, there is only one corporate-owned Nestle Toll House Cafe location.
The concept for the brand came from the Nestle Toll House Chocolate Chip cookies that so many Americans are familiar with. By basing the entire brand off of this product, and partnering with Nestle themselves, Nestle Toll House Cafe has been able to produce delicious treats in the spirit of the original cookie, all at convenient locations for families to enjoy.
Each Nestle Toll House Cookie location serves a variety of cookies, baked goods, and hot and cold beverages. They have a coffee menu, full of various coffee drinks, as well as soda, and cold, bottled beverages. Most locations also serve savory items such as flatbreads, wraps, and paninis, so the family on the go can grab lunch and a sweet snack all at the same place.
By branching out from more than just cookies, they are bringing the Nestle Toll House name to more and more customers every year. Even with a young franchising history, they have managed to make their mark on the industry and give hope of exciting changes and growth to come.
Moving in to the Toll House
Becoming a Nestle Toll House Cafe franchisee is an intense, selective process. They are looking for future franchisees who can demonstrate their financial readiness and entrepreneurial spirit.Their ambition to grow their franchise system means that they are only looking for the best business minds who will assist them with taking their brand to the top.
To begin the process, they ask the candidate to fill out an inquiry form on their website. Filling out this form will grant the applicant access to their franchising brochure. After the applicant has had a chance to read through the brochure, they will be invited to receive a franchise disclosure document.
Once this document has been received and signed for, the candidate must read it thoroughly. It will contain all of the information they will need to know about the franchise agreement, so it is incredibly important that they are comfortable with the contents.
If they agree with the disclosure document, they will then submit a pre-qualification application for Crest Foods to review. After the application has been reviewed, a representative from Crest will contact the applicant to discuss the contents of the application, as well as the applicant’s goals with the franchise.
Those that pass this portion of the application process will be encouraged to contact current Nestle Toll House Cafe franchisees through a system validation call to ask questions regarding ownership. These franchisees know more about what it’s like to run a Cafe than anyone else and they can provide some much-needed insight to the applicant.
Following the validation call, the applicant will schedule a Discover Day at the Nestle Toll House Cafe headquarters in Richardson, Texas. There, the applicant will get a chance to meet the entire team and have face-to-face interviews. This is the franchisors chance to get to know the applicant on a deeper level to really determine if the franchise relationship will be a good fit for both parties.
After Discovery Day, if the applicant chooses to do so, they will be able to request a franchise agreement. Signing this agreement will officially begin the business relationship between franchisee and franchisor.
Total Investment
No franchise opportunity is free. Franchisees must pay to buy the business from the franchisor. Nestle Toll House Cafe locations are no exception. Crest Foods charges a franchise fee of $30,000 for each Nestle Toll House Cafe location.
In addition to the franchise license fee, they are estimated to cost between $41,000 and $472,000 to launch. The large range in estimated startup costs can be attributed to the differences in size of location, as well as the area in which it will be opened. Since Nestle Toll House Cafes can range in size from kiosks to full stores, the cost to construct will vary greatly. Geographic location plays a role in cost due to the differences in costs between materials and labor.
Even with the large estimated range, the startup costs for this franchise opportunity are still lower than many other opportunities out there. It can be hard to trust in a brand that has a wide ranging investment cost, but when the top end of that range falls under many other franchise opportunities, it makes it easier to swallow. It tells the candidate that even if their startup costs fall at the bigger end of that range, they are still managing to launch this business for much less.
Running the Show
It’s important for the potential franchisee to know and understand what it will actually be like running a Nestle Toll House Cafe. Since the application and launching process are only the first, small steps, they do not provide an accurate representation of the relationship with the franchisor. Having an idea of what that will be like before signing the agreement will help the applicant to decide if it is a commitment they are willing to make.
One of the biggest perks to purchasing franchise license instead of starting a stand alone business is the support and guidance the franchisee receives from their franchisor. Nestle Toll House Cafe provides each new franchisee with training before the store is even open to help them learn the company culture and what is expected of them.
The initial training comes in the form of 39 hours spent in a classroom setting, going over the goals and objectives of the brand. Here, the franchisee will learn how they will be expected to run their location, to keep it in line with the franchise’s standards. This will include recipes, approved vendors, management hierarchies, and customer service. With a franchise license, it is incredibly important that the franchise adhere to these standards to remain in good standing with the franchisor.
After the initial training period, and once the location is ready to open, the franchisee will also participate in 50 hours of in-store training. Through this, they will gain hands on experience of what it’s like to run the store. They will take this training and pass it to their newly hired management team, who will then train the hourly employees. This training is the backbone of the entire brand. Without it, each Cafe location will have a different operating procedure, which is detrimental to the cohesiveness of a franchise.
On top of the training, Nestle Toll House Cafe also provides their franchisees with advertising and marketing support. They will create and distribute all national advertising materials. It will be up to the franchisee to do any localized advertising. This support will be available to the franchisee through the life of the license period.
Additional support for the franchisee throughout their contract life will come in the form of technology and computer support. Since Nestle Toll House Cafe provides their franchisees with software to help operate the location, they are also there to ensure the software is operating properly. When computers go down, it can bring business to a halt. Having the help of the franchisor can assist with getting back online sooner, and back to serving customers.
There is a cost to the franchisee for all of the training and ongoing support that they receive. Each franchised location pays the franchisor royalties and advertising fees throughout their franchise agreement.
Royalty fees are, essentially, Nestle Toll House Cafe’s cut of the sales at each franchised location. They receive 6 percent of gross total sales every week from the franchisee. These fees help cover the cost of the support system they provide, while also allowing them to make profits on each location. Their rate is in line with the national average for royalty fees.
The advertising fee is charged at a rate of 1.5 percent of gross total sales. This is slightly lower than the national average for franchise advertising fees, which is 2 percent. It may not sound like much, but over the length of the license, that half a percent difference could add up to some substantial savings.
The length of the license fee should also be considered when talking about the relationship with the franchisor. Because the license is a legally binding document, the franchisee has to be prepared and willing to continue to do business with the franchisor for the entire length. For Nestle Toll House Cafe, that length is 10 years. Franchisees who do not complete the entire contract can be sued by the franchisor, since the franchisor was expecting to collect fees from the location for the whole 10 years.
Franchisees that do complete their license period may be eligible for renewal. If they are pleased with the relationship and the performance of their location, they can apply for a renewal period of five years. If the franchisor agrees and grants the renewal, they may also charge a renewal fee. If they charge for a renewal license, and how much they charge, will be determined by the franchisor at the time of the request.
Current Cafe Performance
Determining the worth of a franchise opportunity should always include a look into the performance of the current locations. This can say a lot about the health of the overall franchise system, as well as the marketability of the product.
Nestle Toll House Cafe currently has 102 franchised locations inside the United States, and 52 franchised locations in other countries, including Puerto Rico, Canada, and select countries in the Middle East.
Looking at their location counts of the past, it shows a steady upward growth pattern, with a few losses here and there. No substantial losses are noted, and the rebounds come quickly and are usually sizeable.
Factoring in the relatively young age of the company, it’s impressive to see that they have grown as quickly as they have, especially when there is a direct competitor in the industry that was successful long before Nestle Toll House Cafe arrived.
Their continued growth and outward expansion has caught the attention of new, eager entrepreneurs who are excited to join a team on an upward trend. For some, even the thought of fierce competition with a well-established rival is invigorating.
Though their growth has not been explosive, it has been steady and consistent, which is usually a stronger indicator of health, anyway. They have managed to increase their number of locations, but also maintain themselves to allow for that growth. All too often, franchises grow faster than they are prepared for, and ultimately suffer under a weak infrastructure.
Nestle Toll House Cafe is growing at the perfect rate: fast enough to show their profitability, and slow enough to maintain their support system.
Taking the Toll
Adding up all of the information that can be gathered about a Nestle Toll House Cafe franchise license paints a pretty clear picture. They are a younger brand that has proven themselves sustainable and capable of competing.
Franchisees seeking this opportunity must be aware of the limited menu and constraints on creativity. Because of their small size and finite offerings, there is very little room for variance. Franchisees have to be comfortable with doing everything exactly how the franchisor wants it, or risk becoming non-compliant.
The profitability of the chain is undeniable. Nearly everyone knows the Nestle Toll House name and that recognition drives customers in. Even with stiff competition from Mrs. Fields, they have managed to carve a place for themselves in the industry and make a dent in the sales of others. With continued hard work, they could eventually find themselves in a battle for the top spot.
Franchisees looking for a quick service or snack food franchise are strongly encouraged to explore this opportunity. There is a lot of room for expansion, with many areas untapped, allowing franchisees to open multiple units in a region.
Current franchised locations are succeeding, making it more likely that additional stores will also succeed. With the current trend that Nestle Toll House Cafe is on, it would be very surprising to see them lose ground in the near future. It’s projected that their success will only increase.
Their franchisees have a lot of potential for success, and the sooner they start, the better.